Don’t think traders and Wall Street market strategists haven’t noticed: on a day when AI stocks like Nvidia (NVDA) and Broadcom (AVGO) fell 17% each, the Dow Jones Industrial Average added 0.4%.
Yes, Wall Street’s “fear gauge”—-the VIX—soared 20% the most since mid-December–but it closed the day just below 18. That’s near the index’s historical rage of normal. When the markets really afraid the VIX spikes into the 30s or even into the 40s.
On a day when AI tech stocks crumbled, the market as a whole didn’t seem especially fearful.
Some of that is technical. The VIX, which measures market expectations of future volatility and implied volatility of S&P 500 index options over the coming 30 days, has been losing some of its predictive power as traders find alternative ways to hedge volatility.
But more of the lack of general market fear is a reflection just how narrow the selling was. Meta Platforms 9META) for example, a big AI player, gained 1.91% to another high.
And more generally, after the close commentary made a big note that the Dow closed higher even as the NASDAQ sold off.
And there was a lot of speculation aboutbnthe possibility of the long-delayed and many-times-predicted rotation out of tech and into safer consumer stocks.
I’ve got two thoughts on those thoughts.
A lackluster earnings season could indeed lead to more tech stock selling in the next few weeks. It’s wait and see time.
In addition, the possibility of significantly higher tariffs from the new administration makes betting on safe consumer stocks less of a certainty, more risky, and less safe. I’d expect much more information on tariff policy when President Donald Trump gives his State of the Union address and releases his budget in early February.
And let’s not forget the Federal Reserve and interest rates.
